UK productivity challenge ‘larger than Brexit’

The UK’s productivity deficit is a larger challenge than Brexit, a Treasury minister has warned.

Robert Jenrick, exchequer secretary to the Treasury, called productivity the “big economic challenge of our generation” and compared the UK’s productivity deficit to that of the 1980s.

He said digital innovation was how the UK would close the gap with international rivals, but added that the UK still appeared to be lagging behind European counterparts in its uptake of new technologies.

Speaking at the Public Sector Show in London this week, Jenrick said: “The UK faces a productivity challenge which is larger than our Brexit challenge, it is the challenge which will define us as a country in the years ahead.

“[In the 1980s] we had a 38% productivity deficit with the United States… Today the productivity gap is wide once again. Even before the financial crisis it was growing compared to the United States, but also to France and Germany and it’s kept on growing.”

Jenrick said the UK’s productivity problem was “essentially one of digital”, and the country lagged behind its European counterparts when it came to adopting productivity boosting technologies including automation, robotics and e-commerce.

Talking about the government’s commitment to roll out full fiber-optic broadband to half of homes and businesses by 2025, Jenrick said the barriers were not around funding but a lack of capacity within the industry.

“We need to ensure that businesses are recruiting and training the engineers, that new entrants are coming in to the market. Great new private sector businesses are already flourishing and delivering value infrastructure. We want to see more, a highly competitive market,” he said.

Jenrick said while Brexit made this “a pivotal year for the UK economy”, the Treasury wanted to used infrastructure investment to “power the economy forward”. He lauded the UK’s infrastructure pipeline, which he said included £600m worth of works funded by a mixture of  public and private sources.

Jenrick said British politics was becoming “increasingly hostile” to private sector involvement in the provision of public services, but said working with the private sector was “absolutely essential” to meet infrastructure spending commitments. “We know there have been difficulties, whether with the collapse of Carillion or with PFI, and there will be reforms that we need to do in the future,” he said

Jenrick referred directly to changes to outsourcing rules, announced by Cabinet Office minister David Lidington earlier this week, as one of the reforms needed.

Posted by Francis Churchill

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